BOA Merrill Fund Survey: Cash Holdings High, Risk Jitters Vary

--Fed/ECB Policy Mistake Top Tail Risk

By Vicki Schmelzer

     NEW YORK (MNI)   - Global investor cash holdings remained high in August,

with risk jitters varied and yet more balanced than in prior months, according

to BOA Merrill Lynch's monthly fund managers survey, released Tuesday. 

     FMS cash levels held steady at 4.9% this month, unchanged from August and

down from 5.0% in May. Cash levels remain above the 10-year average of 4.5%. 

     In August, the top "tail risks" were "Fed/ECB policy mistake," "crash in

global bond markets" and "North Korea," with a net 22%, a net 19% and a net 19

respectively voicing concern about these topics. 

     In July, a net 28% were concerned about a bond market crash, a net 27%

about a Fed/ECB policy mistake and a net 15% about "China credit tightening."

     The "most crowded" trades in August were "Long Nasdaq," for the fourth

straight month, "Short U.S. dollar" and "Long Eurozone equities," with a net

31%, a net 21% and a net 16% of those polled having this view. 

     In July, a net 38% viewed a "Long Nasdaq" as the "most crowded" trade, a

net 15% said "Long U.S/EU credit" and a net 12% said "Long Eurozone equities."

     On asset allocation, a net 36% of those polled were overweight world

equities in August, compared to a net 38% overweight in July and a net 40%

overweight in June, the survey said.

     "The percent saying equity markets are overvalued rose to 46% in August, a

record high," BOA Merrill Lynch said

     In August, a net 59% of investors were underweight global bonds, compared

to a net 55% in July and a net 58% in June. 

     A net 9% of fund managers were underweight commodities in August, versus a

net 6% underweight in July and a net 15% underweight in June. 

     On regional equity allocation, a net 22% of fund managers were underweight

U.S. stocks in August, versus a net 20% underweight in July and a net 15% in

June, BOA Merrill Lynch said. 

     "The last time the underweight in U.S. stocks was larger was in January

2008," the survey said. 

     A net 56% of those polled were overweight eurozone equities this month,

versus a net 54% overweight in July and a net 58% in June. 

     A net 39% were overweight global emerging markets in August, up from a net

37% overweight in July but down from a net 42% overweight in June. 

     Allocation to Japanese equities rose to a net 20% overweight this month,

versus a net 18% overweight in July and a net 1% overweight in June. 

     A net 37% of portfolio managers were underweight UK stocks in August, the

lowest since November 2008. 

     In July, a net 30% of those polled were underweight UK stocks, versus a net

23% underweight in June.

     An overall total of 202 panelists, with $587 billion in assets under

management participated in the BOA Merrill Lynch survey, taken August 4 to 10. 

     "174 participants with $521bn AUM responded to the Global FMS questions and

91 participants with $207bn AUM responded to the Regional FMS questions," the

survey said.

--MNI New York Bureau; tel: +1 212-669-6438; email: vicki.schmelzer@marketnews.com

[TOPICS: M$U$$$,M$$FI$,M$$FX$]